First Wave BioPharma Inc

Notes to Consolidated Financial Statements

December 31, 2023 and 2022

Note 1 - The Company and Basis of Presentation

The Company

First Wave BioPharma, Inc. (“First Wave”) and its wholly-owned subsidiary, First Wave Bio, Inc. (“FWB”), are collectively referred to as the “Company”. Effective October 26, 2022, the Company’s wholly-owned subsidiary, AzurRx SAS, was dissolved. The Company is engaged in the research and development of targeted, non-systemic therapies for the treatment of patients with gastrointestinal (“GI”) diseases. Non-systemic therapies are non-absorbable drugs that act locally, i.e., in the intestinal lumen, skin or mucosa, without reaching an individual’s systemic circulation. Effective March 13, 2024, ImmunogenX LLC also became a subsidiary of the Company.

In March 2024, the Company announced the closing of an acquisition, referred to as a merger with ImmunogenX, Inc. (“IMGX”), a private, clinical-stage biopharmaceutical company founded in 2013, which is developing the biologic, Latiglutenase, for celiac disease. IMGX is also developing CypCel, a metabolic marker compound that can measure the state of small-intestinal recovery of celiac patients undergoing gluten-free diets (“GFDs”).

The Company is currently focused on developing its pipeline of gut-restricted GI clinical drug candidates, including Latiglutenase, a targeted oral biotherapeutic for celiac disease; the biologic Adrulipase (formerly MS1819), a recombinant lipase enzyme designed to enable the digestion of fats and other nutrients; Capeserod, a selective 5-HT4 receptor partial agonist which the Company will pursue for GI indications; and Niclosamide, an oral small molecule with anti-viral and anti-inflammatory properties.

The Company’s Latiglutenase program is focused on the development of an orally administered, minimally - absorbed, biologic for improving multiple gluten - induced symptoms and consequent quality of life (“QOL”) due to inadvertent gluten consumption in patients with celiac disease (“CeD”) by breaking down the gluten into non - immunogenic peptides. The Company's Adrulipase programs are focused on the development of an oral, non-systemic, biologic capsule for the treatment of exocrine pancreatic insufficiency (“EPI”) in patients with cystic fibrosis (“CF”) and chronic pancreatitis (“CP”).The Company's Capeserod program was in - licensed from Sanofi in September 2023. Sanofi conducted Phase 1 and Phase 2 Central Nervous System (“CNS”) trials with over 600 patients. In Sanofi's CNS trials, Capeserod appeared safe and well - tolerated. Research on Capeserod and subsequent artificial intelligence (“AI”) empowered analyses suggest that the drug possesses a unique mechanism of action that is applicable to several GI indications underserved by currently available therapeutics. The Company plans to repurpose Capeserod for GI indications and expects to initiate a Phase 2 clinical development program in gastroparesis. Sanofi retains the right of first refusal to develop and commercialize Capeserod. The Company's Niclosamide programs leverage proprietary oral and topical formulations to address multiple GI conditions, including IBD indications and viral diseases.

The Company is developing its product candidates for a host of GI diseases where there are significant unmet clinical needs and limited therapeutic options, resulting in painful, life threatening and discomforting consequences for patients. Since its inception, the Company has devoted substantially all of its efforts to research and development, business development, and raising capital, and has financed its operations through issuance of common stock, convertible preferred stock, convertible debt and other debt/equity instruments. The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including, but not limited to, development and regulatory success, development by competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, compliance with government regulations, and ability to secure additional capital to fund operations.

Historically, the Company’s major sources of cash have been comprised of proceeds from various public and private offerings of its capital stock. As of December 31, 2023, the Company had approximately $3.7 million in cash and cash equivalents. The Company has incurred recurring losses,has no revenues, has experienced recurring negative operating cash flows and requires significant cash resources to execute its business plans. The Company has an accumulated deficit of approximately $184.3 million as of December 31, 2023.

In addition, the Company is subject to other challenges and risks specific to its business and ability to execute on its strategy, as well as risks and uncertainties common to companies in the pharmaceutical industry with development and commercial operations, including, without limitation, risks and uncertainties associated with: obtaining regulatory approval of its product candidates; delays or problems in the manufacture and supply of its product candidates, loss of single source suppliers or failure to comply with manufacturing regulations; identifying, acquiring or in-licensing additional products or product candidates; pharmaceutical product development and the inherent uncertainty of clinical success; and the challenges of protecting and enhancing its intellectual property rights; complying with applicable regulatory requirements.

Substantial Doubt about the Company's Ability to Continue as a Going Concern

The accompanying consolidated financial statements have been prepared as if the Company will continue as a going concern. The Company has incurred significant operating losses and negative cash flows from operations since inception. On December 31, 2023, the Company had cash and cash equivalents of approximately $3.7 million, and an accumulated deficit of approximately $184.3 million. Subsequent to December 31, 2023, the Company has raised aggregate gross proceeds of approximately $4.0 million from a March 2024 Registered Direct Offering. The Company has incurred recurring losses, has experienced recurring negative operating cash flows, and requires significant cash resources to execute its business plans. Historically, the Company’s major sources of cash have been comprised of proceeds from various public and private offerings of its capital stock. The Company is dependent on obtaining additional working capital funding from the sale of equity and/or debt securities in order to continue to execute its development plans and continue operations.

Without adequate working capital, the Company may not be able to meet its obligations and continue as a going concern. These conditions raise substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis of Presentation and Principles of Consolidation

The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) and include the accounts of First Wave, its wholly owned subsidiary, First Wave Bio, Inc., and its former wholly-owned subsidiary, AzurRx SAS, which was dissolved effective October 26, 2022. Intercompany transactions and balances have been eliminated upon consolidation.

On December 18, 2023, the Company effected a reverse stock split, whereby every twenty shares of the Company’s issued and outstanding common stock were converted automatically into one issued and outstanding share of common stock, but without any change in the number of authorized shares of common stock and the par value per share. On January 18, 2023, the Company effected a reverse stock split, whereby every seven shares of the Company’s issued and outstanding common stock were converted automatically into one issued and outstanding share of common stock, but without any change in the number of authorized shares of common stock and the par value per share. On August 26, 2022, the Company effected a reverse stock split, whereby every thirty shares of the Company’s issued and outstanding common stock were converted automatically into one issued and outstanding share of common stock, but without any change in the number of authorized shares of common stock and the par value per share.

Note 2 - Significant Accounting Policies and Recent Accounting Pronouncements

Use of Estimates

The accompanying consolidated financial statements are prepared in conformity with GAAP and include certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements (including goodwill), and the reported amounts of revenue and expense during the reporting period, including contingencies. Accordingly, actual results may differ from those estimates.

Reverse Stock Split

On December 18, 2023, the Company effected a reverse stock split, whereby every twenty shares of the Company's issued and outstanding common stock was converted automatically into one issued and outstanding share of common stock, but without any change in the number of authorized shares of common stock and the par value per share.

On January 18, 2023, the Company effected a reverse stock split, whereby every seven shares of the Company’s issued and outstanding common stock was converted automatically into one issued and outstanding share of common stock, but without any change in the number of authorized shares of common stock and the par value per share.

On August 26, 2022, the Company effected a reverse stock split, whereby every thirty shares of the Company’s issued and outstanding common stock was converted automatically into one issued and outstanding share of common stock, but without any change in the number of authorized shares of common stock and the par value per share.

Cash and Cash Equivalents and Restricted Cash

The Company considers all highly liquid investments with maturities of three months or less from date of purchase to be cash equivalents. All cash and cash equivalent balances were highly liquid at December 31, 2023 and 2022. As of each of December 31, 2023 and December 31, 2022, the Company has classified approximately $0.02 million as restricted cash.

Concentrations of Credit Risk

Financial instruments that potentially expose the Company to concentrations of credit risk consist of cash. The Company primarily maintains its cash balances with financial institutions in federally insured accounts in the U.S. The Company may from time to time have cash in banks in excess of FDIC insurance limits. At December 31, 2023 and 2022, the Company had approximately $3.7 million and $0.9 million, respectively, in one account in the U.S. in excess of these limits. The Company has not experienced any losses to date resulting from this practice. The Company mitigates its risk by maintaining the majority of its cash and equivalents with high quality financial institutions.

Equity-Based Payments to Non-Employees

Equity-based payments to non-employees are measured at fair value on the grant date per ASU No. 2018-07, Improvements to Nonemployee Share-Based Payment Accounting.

Fair Value Measurements

The Company follows Accounting Standards Codification (“ASC”) Topic 820-10, Fair Value Measurements and Disclosures (“ASC 820”), which among other things, defines fair value, establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability.

As a basis for considering such assumptions, a three-tier fair value hierarchy has been established, which prioritizes the inputs used in measuring fair value as follows:

Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2: Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and

Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions, which reflect those that a market participant would use.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the overall fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the financial instrument.

The Company recognizes transfers between levels as if the transfers occurred on the last day of the reporting period.

Foreign Currency Translation

For foreign subsidiaries with operations denominated in a foreign currency, assets and liabilities were translated to U.S. dollars, which is the functional currency, at period end exchange rates. Income and expense items were translated at average rates of exchange prevailing during the periods presented. Gains and losses from translation adjustments were accumulated in a separate component of stockholders’ equity up until the dissolution of AzurRx SAS in October 2022, at which time cumulative translation adjustments were recognized as a loss for the year ended December 31, 2022.

Goodwill and Intangible Assets

Goodwill represents the excess of the purchase price of the acquired business over the fair value of amounts assigned to assets acquired and liabilities assumed. Goodwill and other intangible assets with indefinite useful lives are reviewed for impairment annually or more frequently if events or circumstances indicate impairment may be present. Any excess in carrying value over the estimated fair value is charged to results of operations. The Company hasnot recognized any impairment charges through December 31, 2023 related to goodwill.

Impairment of Long-Lived Assets

The Company periodically evaluates its long-lived assets for potential impairment in accordance with ASC Topic 360, Property, Plant and Equipment*(“ASC 360”*). Potential impairment is assessed when there is evidence that events or changes in circumstances indicate that the carrying amount of an asset may not be recovered. Recoverability of these assets is assessed based on undiscounted expected future cash flows from the assets, considering a number of factors, including past operating results, budgets and economic projections, market trends and product development cycles. If impairments are identified, assets are written down to their estimated fair value. The Company has not recognized any impairment charges through December 31, 2023.

Income Taxes

Income taxes are recorded in accordance with ASC 740, Accounting for Income Taxes (“ASC 740”), which provides for deferred taxes using an asset and liability approach. The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. The Company determines its deferred tax assets and liabilities based on differences between financial reporting and tax bases of assets and liabilities, which are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Valuation allowances are provided if, based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

The Company accounts for uncertain tax positions in accordance with the provisions of ASC 740. When uncertain tax positions exist, the Company recognizes the tax benefit of tax positions to the extent that the benefit will more likely than not be realized. The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances. At December 31, 2023 and 2022, the Company does not have any significant uncertain tax positions.

Leases

Leases are recorded on the balance sheet as right of use assets and lease obligations.

Loss Per Share

Basic loss per share (“EPS”) is computed by dividing the loss attributable to common shareholders by the weighted average number of shares of Common Stock outstanding. Diluted EPS reflects the potential dilution that could occur from shares of Common Stock issuable through the exercise or conversion of stock options, restricted stock awards, warrants and convertible securities. In certain circumstances, the conversion of options is excluded from diluted EPS if the effect of such inclusion would be anti-dilutive.

The dilutive effect of stock options is determined using the treasury stock method. Stock options to purchase shares of Common Stock of the Company during fiscal 2023 and 2022 were not included in the computation of diluted EPS because the Company has incurred a loss for the years ended December 31, 2023 and 2022 and the effect would be anti-dilutive.

Research and Development

Research and development costs are charged to operations when incurred and are included in operating expense, except for goodwill related to patents. Research and development costs consist principally of compensation of employees and consultants that perform the Company’s research activities, payments to third parties for preclinical and non-clinical activities, expenses with clinical research organizations (“CROs”), investigative sites, consultants and contractors that conduct or provide other services relating to clinical trials, costs to acquire drug product, drug supply and clinical trial materials from contract development and manufacturing organization (“CDMOs”) and third-party contractors relating to chemistry, manufacturing and controls (“CMC”) efforts, the fees paid for and to maintain the Company’s licenses, amortization of intangible assets related to the acquisition of Adrulipase and research and development costs related to Niclosamide.

Research and Development – Intellectual Property Acquired

The Company records intellectual property in asset acquisitions that have not reached technological feasibility and which have no alternative future use, as an expense at the acquisition date. On December 31, 2020, the Company entered into a license agreement (the “FWB License Agreement”) with FWB, pursuant to which FWB granted the Company an exclusive license to certain patents and patent applications related to a proprietary formulation of Niclosamide for use in the fields of ICI-AC and COVID-19 GI infections. The acquisition of intellectual property and patents for the worldwide, exclusive right to develop, manufacture, and commercialize proprietary formulations of Niclosamide for the fields of treating ICI-AC and COVID-19 in humans was accounted for as an asset acquisition and initial liabilities of approximately $13.3 million in connection with the license acquisition were recorded as research and development expense, because it was determined to have no alternative future uses and therefore no separate economic value, which included cash payments totaling approximately $10.3 million and the issuance of approximately $3.0 million worth of preferred stock. Upon consummation of the Merger on September 13, 2021, the FWB License Agreement was effectively canceled and the total purchase price of $22.0 million was recorded as an expense at the Merger date.

On July 29, 2022, the Company reached an agreement to restructure its obligations to the former FWB stockholders (the “July 2022 Term Sheet”). The Company agreed to pay: (i) $1.5 million in cash on July 29, 2022; (2) $1.0 million in cash no later than September 29, 2022 (the “Second Payment”); and (iii) $2.0 million on the earlier of November 30, 2022 or the completion of one or more qualifying equity offerings. As of December 31, 2022, the Company made payments to the former FWB stockholders of $4.5 million consisting of the upfront payment of $1.5 million, the Second Payment of $1.0 million, and the third payment of $2.0 million. In accordance with the terms of the July 2022 Term Sheet, effective upon the Second Payment, the approximately $10.1 million of remaining fixed payment obligations previously owed to the former FWB shareholders was settled, which was recorded as a decrease to expense in the year ended December 31, 2022. The $2.0 million payment owed by November 30, 2022 was recorded as an expense upon execution of the July 2022 Term Sheet (see Note 4).

Stock-Based Compensation

The Company’s board of directors (the “Board”) and stockholders have adopted and approved the Amended and Restated 2014 Omnibus Equity Incentive Plan (the “2014 Plan”) which took effect on May 12, 2014, and the 2020 Omnibus Equity Incentive Plan, which took effect on September 11, 2020 (the “2020 Plan”). From the effective date of the 2020 Plan, no new awards have been or will be made under the 2014 Plan.

The Company accounts for its stock-based compensation awards to employees and Board members in accordance with ASC Topic 718, Compensation-Stock Compensation (“ASC 718”). ASC 718 requires all stock-based payments to employees and Board members, including grants of employee stock options, to be recognized in the statements of operations by measuring the fair value of the award on the date of grant and recognizing this fair value as stock-based compensation using a straight-line method over the requisite service period, generally the vesting period.

For awards with performance conditions that affect their vesting, such as the occurrence of certain transactions or the achievement of certain operating or financial milestones, recognition of fair value of the award occurs when vesting becomes probable.

The Company estimates the grant date fair value of stock option awards using the Black-Scholes option-pricing model. The use of the Black-Scholes option-pricing model requires management to make assumptions with respect to the expected term of the option, the expected volatility of the Common Stock consistent with the expected life of the option, risk-free interest rates and expected dividend yields of the Common Stock.

Recent Accounting Pronouncements

In August 2020, the Financial Accounting Standards Board (the “FASB”) issued accounting pronouncement ASU 2020-06 – Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”) related to the measurement and disclosure requirements for convertible instruments and contracts in an entity’s own equity. The pronouncement simplifies and adds disclosure requirements for the accounting and measurement of convertible instruments and the settlement assessment for contracts in an entity’s own equity. As a smaller reporting company, as defined by the U.S. Securities and Exchange Commission (the “SEC”), this pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2023. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company early adopted ASU 2020-06 effective January 1, 2022.

In June 2016, the FASB issued accounting pronouncement ASU 2016-13 – Measurement of Credit Losses on Financial Statements (“ASU 2016-13”). The new standard requires that expected credit losses relating to financial assets measured on an amortized cost basis and available-for-sale debt securities be recorded through an allowance for credit losses. It also limits the amount of credit losses to be recognized for available-for-sale debt securities to the amount by which carrying value exceeds fair value and also requires the reversal of previously recognized credit losses if fair value increases. In November 2019, the FASB issued ASU 2019-10 – Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates, which amended the effective date for certain companies. The standard is effective for public companies eligible to be smaller reporting companies for annual and interim periods beginning after December 15, 2022. The Company adopted ASU 2016-13 effective for the year ended December 31, 2022 and its adoption did not have a material effect on its financial statements and related disclosures.

In June 2022, the FASB issued ASU 2022-03 - Fair Value Measurement, or Topic 820: Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions (“ASU 2022-03”). This new standard clarifies the guidance in Topic 820 when measuring the fair value of an equity security subject to contractual restrictions that prohibit the sale of an equity security and introduces new disclosure requirements for equity securities subject to contractual sale restrictions that are measured at fair value in accordance with Topic 820. The Company has assessed the impact of the update and determined it does not have a material impact on the accompanying financial statements and disclosures.

The Company has evaluated other recently issued accounting pronouncements and has concluded that the impact of recently issued standards that are not yet effective will not have a material impact on the Company’s financial position or results of operations upon adoption.

Note 3 - Fair Value Disclosures

Fair value is the price that would be received from the sale of an asset or paid to transfer a liability assuming an orderly transaction in the most advantageous market at the measurement date. GAAP establishes a hierarchical disclosure framework that prioritizes and ranks the level of observability of inputs used in measuring fair value.

The fair value of the Company’s financial instruments are as follows:

At December 31, 2023 and 2022, the Company had no other assets or liabilities that are subject to fair value methodology and estimation in accordance with U.S. GAAP.

Note 4 – Asset Acquisition

The Asset Acquisition

During the year ended December 31, 2022, the Company paid an aggregate of $6.9 million in cash towards the purchase price of FWB in accordance with the terms of an Agreement and Plan of Merger dated as of September 13, 2021 (the “Merger Agreement”) and a settlement agreement reached on November 21, 2021 (the “November 2021 Settlement Agreement”).

On May 19, 2022, the Representative filed a complaint against the Company in the Court of Chancery in the State of Delaware (the “FWB Action”) for breach of contract and anticipatory repudiation or for unjust enrichment. The FWB Action sought specific performance of the Company’s obligations under the Merger Agreement and the November 2021 Settlement Agreement, including all payments then owed and to be owed to the Representative, and damages at the maximum amount permitted by law. On July 29, 2022, the Company reached an agreement with the Representative to settle the FWB Action and to restructure the Company’s obligations to the former FWB stockholders (the “July 2022 Term Sheet”). The Company agreed to pay the Representative: (i) $1.5 million in cash on July 29, 2022; (2) $1.0 million in cash no later than September 29, 2022 (the “Second Payment”); and (iii) $2.0 million on the earlier of November 30, 2022 and the completion by the Company of one or more qualifying equity offerings (collectively, the “Payments”). The Representative is also entitled to receive future cash payments conditioned on the achievement of certain development milestones for Adrulipase and to a percentage of any consideration received by the Company in the event of a license or sale of Adrulipase, subject to a cap. The Representative also is entitled receive a percentage of the consideration received by the Company in the event of a license or sale of Niclosamide and will retain its existing milestone payment rights with respect to Niclosamide. In the event that the consideration received by the Company in connection with the sale or license of Adrulipase or Niclosamide consists of securities or other non-cash consideration, the Representative will have the right to elect either to receive its payment in such form of consideration or to cause the licensee or acquirer to assume the obligations described herein. In the event of a “Company Sale” (as defined in the July 2022 Term Sheet), the Representative is entitled to receive a pro rata share of the total consideration received by the Company or its stockholders up to $4.0 million (plus any unpaid Payments whether or not then due) based on a formula set forth in the July 2022 Term Sheet. In certain circumstances, the Representative has the right to treat a “Company Sale” as a sale of Adrulipase or Niclosamide, as applicable, and to treat the Company Sale as a sale of the related asset and to receive the consideration with respect thereto described herein.

In the July 2022 Term Sheet, the Representative agreed to stay the FWB Action for a period of 90 days and to eliminate the Company’s obligation to pay a portion of any offering proceeds to the Representative. In addition, the Company’s obligation to use commercially reasonable efforts to develop Niclosamide will be deferred for a period of 24 months from the date of the July 2022 Term Sheet. Effective upon the Second Payment, the Representative dismissed the FWB Action with prejudice and extinguished the remaining fixed payment obligations owed to the former FWB shareholders. On November 30, 2022, the Company entered into a formal settlement agreement with the Representative on substantially the same terms as the July 2022 Term Sheet (the “November 2022 Settlement Agreement”).

Accounting Treatment

Under the July 2022 Term Sheet, the $1.5 million in cash due and paid on July 29, 2022, as well as the Second Payment due and paid in September 2022, were recorded as a reduction to current liabilities for the year ended December 31, 2022. Effective upon the Second Payment, the approximately $10.1 million of remaining fixed payment obligations previously owed to the former FWB shareholders was settled. The third payment obligation of $2.0 million due and paid by November 30, 2022 was recorded as research and development expense in the year ended December 31, 2022.

The remaining unachieved potential milestone payments and revenue share are not yet considered probable, therefore have not been accrued as of December 31, 2022. Depending on the status of development at the time a contingent payment is recognized, the Company may determine that the payment should be expensed as research and development or be capitalized as an intangible asset. This determination will be based on the facts and circumstances that exist at the time a contingent payment is recognized.

Note 5 – Property, Equipment and Leasehold Improvements

Property, equipment and leasehold improvements consisted of the following:

Depreciation expense was approximately $29,000 for each of the years ended December 31, 2023 and December 31, 2022.

Note 6 – Goodwill

Goodwill was reinstated on the Company’s books in U.S. dollars due to the dissolution of AzurRx SAS in October 2022. Going forward, there will no longer be a foreign translation adjustment. Goodwill is as follows:

Note 7 - Accrued Expenses

Accrued expenses consisted of the following:

Note 8 – Note Payable

Directors and Officer’s and Other Liability Insurances

On November 30, 2023, the Company entered into 9-month financing agreements for its directors and officer’s liability insurance, as well as other corporate insurances, in the amount of approximately $683,000 that bears interest at an annual rate of 7.90%. Monthly payments, including principal and interest, are approximately $79,000 per month. The balance due under these financing agreements was approximately $613,000 at December 31, 2023.

On November 30, 2022, the Company entered into a 9-month financing agreement for its directors and officer’s liability insurance in the amount of approximately $677,000 that bears interest at an annual rate of 6.79%. Monthly payments, including principal and interest, were approximately $77,000 per month. The balance due under this financing agreement was approximately $603,000 at December 31, 2022.

Note 9 – Capital Stock

Our certificate of incorporation, as amended and restated (the “Charter”) authorized the issuance of up to 100,000,000 shares of Common Stock, par value $0.0001 per share, and 10,000,000 shares of preferred stock, par value $0.0001 per share.

On December 18, 2023, the Company effected a reverse stock split, whereby every twenty shares of the Company’s issued and outstanding common stock was converted automatically into one issued and outstanding share of common stock, but without any change in the number of authorized shares of common stock and the par value per share.

On January 18, 2023, the Company effected a reverse stock split, whereby every seven shares of the Company's issued and outstanding common stock was converted automatically into one issued and outstanding share of common stock, but without any change in the number of authorized shares of common stock and the par value per share.

On August 26, 2022, the Company effected a reverse stock split, whereby every thirty shares of the Company’s issued and outstanding common stock was converted automatically into one issued and outstanding share of common stock, but without any change in the number of authorized shares of common stock and the par value per share.

Common Stock

The Company had 1,560,998 and 49,750 shares of its Common Stock issued andoutstanding at December 31, 2023 and 2022, respectively.

Each holder of Common Stock is entitled to one vote for each share of Common Stock held on all matters submitted to a vote of the stockholders. The Company’s Charter and Amended and Restated Bylaws (the “Bylaws”) do not provide for cumulative voting rights.

In addition, the holders of the Company’s Common Stock will be entitled to receive ratably such dividends, if any, as may be declared by the Board out of legally available funds; however, the current policy of the Board is to retain earnings, if any, for operations and growth. Upon liquidation, dissolution or winding-up, the holders of the Company’s Common Stock will be entitled to share ratably in all assets that are legally available for distribution.

Holders of the Company’s Common Stock have no preemptive, conversion or subscription rights, and there are no redemption or sinking fund provisions applicable to the Common Stock. The rights, preferences and privileges of the holders of Common Stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of the Company’s preferred stock that it may designate and issue in the future.

Preferred Stock

The Board is authorized to divide the preferred stock into any number of series, fix the designation and number of each such series, and determine or change the designation, relative rights, preferences, and limitations of any series of preferred stock. The Board of may increase or decrease the number of shares initially fixed for any series, but no decrease may reduce the number below the shares then outstanding and duly reserved for issuance.

On July 16, 2020, the Company designated approximately 5,194.81 shares as Series B Preferred Stock. As of December 31, 2023 and 2022,514.96 and 550.17 shares of Series B Preferred Stock were issued andoutstanding, respectively. Approximately 2,282.23 shares of Series B Preferred Stock remain authorized but undesignated and unissued.

On January 5, 2021, the Company designated 75,000 shares as Series C Preferred Stock. Shares of Series C Preferred Stock converted into Common Stock (or Prefunded Warrants, as applicable) or redeemed shall be canceled and shall not be reissued. As of December 31, 2023 and 2022,0 shares of Series C Preferred Stock were issued and outstanding, with approximately 41,903 shares of Series C Preferred Stock remaining authorized but unissued.

On July 15, 2022, the Company designated 150 shares as Series D Preferred Stock and had 0 shares of Series D Preferred Stock issued and outstanding on December 31, 2023 and 2022.

On July 15, 2022, the Company designated 150 shares as Series E Preferred Stock and had 0 shares of Series E Preferred Stock issued and outstanding on December 31, 2023 and 2022.

On November 28, 2022, the Company designated 7,000 shares as Series F Preferred Stock and had 0 shares of Series F Preferred Stock issued and outstanding on December 31, 2023 and 2022.

At December 31, 2023, the Company had approximately 9,999,485.04 shares of preferred stock remaining authorized but unissued.

Series B Convertible Preferred Stock

Pursuant to the Certificate of Designation of Rights and Preferences of the Series B Preferred Stock (the “Series B Certificate of Designation”), the Series B Preferred Stock will rank senior to the Common Stock with respect to distributions of assets upon the liquidation, dissolution or winding up of the Company. Each share of Series B Preferred Stock has a stated value of $7,700 (the “Series B Stated Value”). Each holder of shares of Series B Preferred Stock, in preference and priority to the holders of all other classes or series of stock of the Company, is entitled to receive dividends, commencing from the date of issuance. Such dividends may be paid by the Company only when, as and if declared by the Board, out of assets legally available therefor, semiannually in arrears on the last day of June and December in each year, commencing December 31, 2020, at the dividend rate of 9.0% per year, which is cumulative and continues to accrue on a daily basis whether or not declared and whether or not the Company has assets legally available therefor. The Company may pay such dividends at its option either in cash or in kind in additional shares of Series B Preferred Stock (rounded down to the nearest whole share), provided the Company must pay in cash the fair value of any such fractional shares in excess of $100.00. At December 31, 2023 and 2022, aggregate dividends payable amounted to approximately $1.1 million and $761,000, respectively. Dividends accrued during the years ending December 31, 2023 and December 31, 2022 were approximately $308,000 and $296,000, respectively.

Under the Certificate of Designations, each share of Series B Preferred Stock carries a liquidation preference equal to the Series B Stated Value (as adjusted thereunder) plus accrued and unpaid dividends thereon (the “Liquidation Preference”). If the Company voluntarily or involuntarily liquidates, dissolves or winds up its affairs, each holder of the Series B Preferred Stock will be entitled to receive out of the Company’s assets available for distribution to stockholders, after satisfaction of liabilities to creditors, if any, but before any distribution of assets is made on the Common Stock or any of the Company’s shares of stock ranking junior as to such a distribution to the Series B Preferred Stock, a liquidating distribution in the amount of the Stated Value of all such holder’s Series B Preferred Stock plus all accrued and unpaid dividends thereon. At each of December 31, 2023 and 2022, the value of the liquidation preference of the Series B Preferred stocks aggregated to approximately $5.0 million.

Each share of Series B Preferred Stock will be convertible at the holder’s option at any time, into Common Stock at a conversion rate equal to the quotient of (i) the Series B Stated Value divided by (ii) the conversion price of $32,340.00. In addition, at any time after the six month anniversary of the Series B Closing Date, if the closing sale price per share of Common Stock exceeds 250% of the conversion price, or $80,850.00, for 20 consecutive trading days, then all of the outstanding shares of Series B Preferred Stock will automatically convert (the “Automatic Conversion”) into such number of shares of Common Stock as is obtained by multiplying the number of shares of Series B Preferred Stock to be so converted, plus the amount of any accrued and unpaid dividends thereon, by the Series B Stated Value per share and dividing the result by the then applicable conversion price. The Series B Preferred Stock contains limitations that prevent the holder thereof from acquiring shares of Common Stock upon conversion (including pursuant to the Automatic Conversion) that would result in the number of shares beneficially owned by such holder and its affiliates exceeding 9.99% of the total number of shares of Common Stock outstanding immediately after giving effect to the conversion, which percentage may be increased or decreased at the holder’s election not to exceed 19.99%.

The holders of the Series B Preferred Stock, voting as a separate class, will have customary consent rights with respect to certain corporate actions of the Company. The Company may not take the following actions without the prior consent of the holders of at least a majority of the Series B Preferred Stock then outstanding: (a) authorize, create, designate, establish, issue or sell an increased number of shares of Series B Preferred Stock or any other class or series of capital stock ranking senior to or on parity with the Series B Preferred Stock as to dividends or upon liquidation; (b) reclassify any shares of Common Stock or any other class or series of capital stock into shares having any preference or priority as to dividends or upon liquidation superior to or on parity with any such preference or priority of Series B Preferred Stock; (c) amend, alter or repeal the Certificate of Incorporation or Bylaws of the Company and the powers, preferences, privileges, relative, participating, optional and other special rights and qualifications, limitations and restrictions thereof, which would adversely affect any right, preference, privilege or voting power of the Series B Preferred Stock; (d) issue any indebtedness or debt security, other than trade accounts payable, insurance premium financings and/or letters of credit, performance bonds or other similar credit support incurred in the ordinary course of business, or amend, renew, increase, or otherwise alter in any material respect the terms of any such indebtedness existing as of the date of first issuance of shares of Series B Preferred Stock; (e) redeem, purchase, or otherwise acquire or pay or declare any dividend or other distribution on (or pay into or set aside for a sinking fund for any such purpose) any capital stock of the Company; (f) declare bankruptcy, dissolve, liquidate, or wind up the affairs of the Company; (g) effect, or enter into any agreement to effect, a Change of Control (as defined in the Certificate of Designations); or (h) materially modify or change the nature of the Company’s business.

Most Favored Nations Exchange Right and Waiver Agreements

In the event the Company effects any issuance by the Company or any of its subsidiaries of Common Stock or Common Stock equivalents for cash consideration, or a combination of units thereof (a “Subsequent Financing”), each holder of the Series B Preferred Stock had the right, subject to certain exceptions set forth in the Series B Certificate of Designations, at its option, to exchange (in lieu of cash subscription payments) all or some of the Series B Preferred Stock then held (with a value per share of Series B Preferred Stock equal to the stated value of each share of Series B Preferred Stock, or $7,700.00, plus accrued and unpaid dividends thereon, of the Series B Preferred Stock (the “Exchange Amount”)) for any securities or units issued in a Subsequent Financing on dollar-for-dollar basis (the “Series B Exchange Right”).

Between February 1, 2022 and February 7, 2022, the Company entered into waiver agreements (the “Waiver”) with certain holders of Series B Preferred Stock, pursuant to which the Company agreed to pay a cash waiver fee equal to ten percent of the stated value of the shares of Series B Preferred Stock held by such holder (other than holders who are insiders who did not receive a cash waiver fee) and such holder agreed to irrevocably waive its Series B Exchange Right with respect to any Subsequent Financing that occurred from and after the date of the Waiver until December 31, 2022.

During the year ended December 31, 2022, the Company entered into Waivers with holders of approximately $2.88 million of stated value of Series B Preferred Stock. The Company also entered into Waivers with Company insiders holding approximately $0.047 million of stated value of Series B Preferred Stock for which the Company did not pay a waiver fee. The cash waivers paid of approximately $0.233 million were recorded as other expense on the Company’s condensed consolidated statements of operations for the year ended December 31, 2022.

Effective May 12, 2022, the holders of 81.3% of the outstanding shares of the Series B Preferred Stock permanently waived for themselves and all other holders of the Series B Preferred Stock the Series B Exchange Right with respect to any Subsequent Financing occurring on or after January 1, 2022 (the “Permanent Waiver”). Holders of Series B Preferred Stock as of the April 27, 2022 record date were entitled to notice of and to consent to the Permanent Waiver (the “Record Holders”).

Pursuant to the terms of the Series B Certificate of Designation, the written consent of the holders of at least a majority of the Series B Preferred Stock outstanding was required to consent to the Permanent Waiver (the “Required Consent”). The Company requested that the Record Holders consent to the Permanent Waiver by executing and delivering a joinder to the Waiver Agreement (as defined below). The execution and delivery of the joinder to the Waiver Agreement was deemed, for purposes of Section 228 of the General Corporation Law of the State of Delaware, to be an action by written consent in lieu of a meeting to approve the Permanent Waiver. The Company’s solicitation of consents to the Permanent Waiver terminated in accordance with its terms at 5:00 p.m., Eastern Time, on May 12, 2022 (the “Expiration Date”). The Record Holders who consented to the Permanent Waiver prior to the Expiration Date are referred to herein as the “Consenting Holders”.

The Required Consent was obtained from the Consenting Holders and the solicitation terminated in accordance with its terms as of the Expiration Date. The Permanent Waiver was effective immediately upon the Expiration Date and was binding on all holders of the Series B Preferred Stock, including those holders that did not timely consent to the Permanent Waiver prior to the Expiration Date. The Permanent Waiver will also be applicable to any future holder of Series B Preferred Stock. A notation of the Permanent Waiver was made on the books and records of the Company’s transfer agent and a legend reflecting the Permanent Waiver was placed on any physical share certificate representing shares of Series B Preferred Stock.

Pursuant to the terms of a Waiver Agreement entered into by the Company and the Consenting Holders (the “Waiver Agreement”), the Company permanently reduced the exercise price of the Series B Warrants originally issued on July 16, 2020 (the “Series B Warrants”) held by the Consenting Holders to $1,050.00 per share or, in the case of Consenting Holders who are officers and directors of the Company, $1,383.48 (the “Exercise Price Reduction”). Only Consenting Holders are entitled to the Exercise Price Reduction. Series B Warrants to purchase an aggregate of approximately 59 shares of Common Stock received the Exercise Price Reduction which was effective as of the Expiration Date. As a result of the Exercise Price Reduction of the Series B Warrants described above, the Company recorded a deemed dividend of approximately $0.047 million for the year ended December 31, 2022.

As of December 31, 2023, (i) holders of approximately 1,839.76 shares of Series B Preferred Stock with an aggregate Exchange Amount of approximately $14.4 million had previously elected to exercise their Series B Exchange Rights into Series C Preferred Stock, convertible into an aggregate of 395 shares of Common Stock (which conversion the Company has elected to make in full), and additional Investor Warrants exercisable for up to an aggregate of 395 shares of Common Stock, (ii) holders of approximately 130.18 shares of Series B Preferred Stock with an aggregate Exchange Amount of approximately $1.2 million had previously elected to exercise their Series B Exchange Rights into 101 shares of Common Stock with no warrants, and (iii) holders of approximately 30.91 shares of Series B Preferred Stock with an aggregate Exchange Amount of approximately $265,000 had previously elected to exercise their Series B Exchange Rights into 44 shares of Common Stock, and additional Series C Warrants exercisable for up to an aggregate of 44 shares of Common Stock.

Series F Preferred Stock

On November 25, 2022, the board of directors of the Company declared a dividend of 0.001 of a share of Series F Preferred Stock, par value $0.0001 per share, for each outstanding share of Company common stock, par value $0.0001 per share to stockholders of record on December 5, 2022. Each share of Series F Preferred Stock entitled the holder thereof to 1,000,000 votes per share (each 0.001 of a share of Series F Preferred Stock would entitle the holder thereof to 1,000 votes).

The outstanding shares of Series F Preferred Stock voted together with the outstanding shares of Common Stock of the Company as a single class exclusively with respect to (1) any proposal to reclassify the outstanding shares of Common Stock into a smaller number of shares of Common Stock at a ratio specified in or determined in accordance with the terms of such amendment (the “Reverse Stock Split”) and (2) any proposal to adjourn any meeting of stockholders called for the purpose of voting on the Reverse Stock Split (the “Adjournment Proposal”). The Series F Preferred Stock will not be entitled to vote on any other matter, except to the extent required under the Delaware General Corporation Law. The holders of Series F Preferred Stock, as such, will not be entitled to receive dividends of any kind.

The Series F Preferred Stock will rank senior to the Common Stock as to any distribution of assets upon a liquidation, dissolution or winding up of the Company, whether voluntarily or involuntarily (a “Dissolution”). Upon any Dissolution, each holder of outstanding shares of Series F Preferred Stock will be entitled to be paid out of the assets of the Company available for distribution to stockholders, prior and in preference to any distribution to the holders of Common Stock, an amount in cash equal to $0.0001 per outstanding share of Series F Preferred Stock.

At The Market Agreement with H.C. Wainwright

On May 26, 2021, the Company entered into an At The Market Offering Agreement (the “ATM Agreement”) with H.C. Wainwright & Co., LLC (“Wainwright”), as sales agent, pursuant to which the Company may issue and sell, from time to time, through Wainwright, shares of its Common Stock, and pursuant to which Wainwright may sell its Common Stock by any method permitted by law deemed to be an “at the market offering” as defined by Rule 415(a)(4) promulgated under the Securities Act of 1933, as amended. The Company will pay Wainwright a commission of 3.0% of the aggregate gross proceeds from each sale of Common Stock. As of May 24, 2022, the Company was authorized to offer and sell up to $8.0 million of its Common Stock pursuant to the ATM Agreement. During the year ended December 31, 2022, the Company issued and sold an aggregate of 10,851 shares of Common Stock under the ATM Agreement for which the Company received gross proceeds of approximately $8.0 million less issuance costs incurred of approximately $309,000. The Company did not utilize the ATM Agreement during the year ended December 31, 2023.

December 2023 Inducement Offering

On December 27, 2023 the Company entered into warrant exercise inducement offer letters with certain holders (the “December 2023 Holders”) of warrants to purchase shares of the Company’s Common Stock (the “December 2023 Existing Warrants”) pursuant to which the December 2023 Holders agreed to exercise for cash their December 2023 Existing Warrants to purchase 881,337 shares of the Company’s Common Stock, in the aggregate, at a reduced exercised price of $5.50 per share, in exchange for the Company’s agreement to issue new warrants (the “December 2023 Inducement Warrants”) on substantially the same terms as the December 2023 Existing Warrants to purchase up to 1,762,674 shares of the Company’s Common Stock (the “December 2023 Inducement Warrant Shares”) and a cash payment of $0.125 per December 2023 Inducement Warrant Share which was paid in full upon the exercise of the December 2023 Existing Warrants (the “December 2023 Inducement Offering”). The Company received aggregate gross proceeds of approximately $4.8 million from the exercise of the December 2023 Existing Warrants by the Holders and the sale of the December 2023 Inducement Warrants. The Company engaged Roth Capital Partners, LLC (“Roth”) to act as its financial advisor in connection with the transactions summarized above and paid Roth approximately $291,000 for its services.

September 2023 Inducement Offering

On September 14, 2023, the Company entered into warrant exercise inducement offer letters with certain holders (the “September 2023 Holders”) of warrants to purchase shares of the Company’s Common Stock (the “September 2023 Existing Warrants”) pursuant to which the September 2023 Holders agreed to exercise for cash their September 2023 Existing Warrants to purchase 294,101 shares of the Company’s Common Stock, in the aggregate, at a reduced exercised price of $8.60 per share, in exchange for the Company’s agreement to issue new warrants (the “September 2023 Inducement Warrants”) on substantially the same terms as the September 2023 Existing Warrants to purchase up to 588,204 shares of the Company’s Common Stock (the “September 2023 Inducement Warrant Shares”) and a cash payment of $2.50 per September 2023 Inducement Warrant Share which was paid in full upon the exercise of the September 2023 Existing Warrants (the “September 2023 Inducement Offering”). The Company received aggregate gross proceeds of approximately $4.0 million from the exercise of the September 2023 Existing Warrants by the Holders and the sale of the September 2023 Inducement Warrants. The Company engaged Roth to act as its financial advisor in connection with the transactions summarized above and paid Roth $220,000 for its services.

July 2023 Offering

On July 21, 2023, the Company completed an offering (the “July 2023 Offering”) for an aggregate of (i)30,500 shares of Common Stock, (ii) pre-funded warrants (the “July 2023 Pre-Funded Warrants”) to purchase up to an aggregate of 133,750 shares of Common Stock, and (iii) common warrants (the “July 2023 Warrants”) to purchase up to an aggregate of 328,500 shares of Common Stock. The public offering price for each share of Common Stock and accompanying July 2023 Warrant to purchaseone share of Common Stock was $12.80 per share. The July 2023 Pre-Funded Warrants have an exercise price of $0.002 per share, are exercisable immediately and will expire when exercised in full. To date, pre-funded warrants have been exercised to purchase 133,750 shares of Common Stock. The July 2023 Warrants have an exercise price of $12.80 per share, are exercisable immediately and will expire five years from the initial exercise date.

The Company received gross proceeds of approximately $2.1 million less placement agent’s fees and other offering expenses of approximately $250,000.

June 2023 Inducement Offering

On June 13, 2023, the Company entered into warrant exercise inducement offer letters with certain holders (the “June 2023 Holders”) of warrants to purchase shares of the Company’s Common Stock (the “June 2023 Existing Warrants”) pursuant to which the June 2023 Holders agreed to exercise for cash their June 2023 Existing Warrants to purchase 86,216 shares of the Company’s Common Stock, in the aggregate, at a reduced exercised price of $23.00 per share, in exchange for the Company’s agreement to issue new warrants (the “June 2023 Inducement Warrants”) on substantially the same terms as the June 2023 Existing Warrants to purchase up to 172,433 shares of the Company’s Common Stock (the “June 2023 Inducement Warrant Shares”) and a cash payment of $2.50 per June 2023 Inducement Warrant Share which was paid in full upon the exercise of the June 2023 Existing Warrants (the “June 2023 Inducement Offering”). The Company received aggregate gross proceeds of approximately $2.4 million from the exercise of the June 2023 Existing Warrants by the June 2023 Holders and the sale of the June 2023 Inducement Warrants. The Company engaged Roth to act as its financial advisor in connection with the transactions summarized above and paid Roth $150,000 for its services.

March 2023 Private Placement

On March 15, 2023, the Company completed a private placement offering (the “March 2023 Offering”) priced at market under Nasdaq rules, for an aggregate of (i)6,400 shares of Common Stock, (ii) pre-funded warrants (the “March 2023 Pre-Funded Warrants”) to purchase up to an aggregate of 44,751 shares of Common Stock and (iii) common warrants (the “March 2023 Warrants”) to purchase up to an aggregate of 102,302 shares of Common Stock. The public offering price for each share of Common Stock and accompanying March 2023 Warrant to purchaseone share of Common Stock was $78.20 per share. The March 2023 Pre-Funded Warrants have an exercise price of $0.002 per share, are exercisable immediately and will expire when exercised in full. The March 2023 Warrants have an exercise price of $73.20 per share, are exercisable immediately and will expire five years from the initial exercise date.

The Company received gross proceeds of approximately $4.0 million less placement agent’s fees and other offering expenses of approximately $300,000.

November 2022 Private Placement

On November 22, 2022, the Company completed a private placement (the “November 2022 Offering”) in which the Company issued an aggregate of (i) pre-funded warrants (the “November 2022 Pre-Funded Warrants”) to purchase up to an aggregate of 29,761 shares (the “November 2022 Pre-Funded Warrant Shares”) of the Company’s common stock, par value $0.0001 per share (the “Common Stock”), and (ii) common warrants (the “November 2022 Common Warrants” and collectively with the Pre-Funded Warrants, the “November 2022 Warrants”), to purchase up to an aggregate of 59,524 shares of Common Stock (the “November 2022 Common Warrant Shares” and collectively with the Pre-Funded Warrant Shares, the “November 2022 Warrant Shares”) at a purchase price of $83.986 per November 2022 Pre-Funded Warrant and accompanying November 2022 Common Warrant.

The issuance of the November 2022 Pre-Funded Warrant Shares in excess of 19.99% of the shares of Common Stock outstanding prior to the Offering and the issuance of the November 2022 Common Warrant Shares was subject to stockholder approval under Nasdaq rules (the “Stockholder Approval”), which occurred on January 13, 2023. The November 2022 Pre-Funded Warrants have an exercise price of $0.014 per share, are exercisable immediately upon issuance and will expire when exercised in full. The November 2022 Common Warrants have an exercise price of $107.59 per share, are exercisable upon issuance and will expire five and one-half years from the initial exercise date (see Note 10).

As compensation to Wainwright, who was the exclusive placement agent in connection with the November 2022 Offering, the Company paid Wainwright a cash fee of 7% of the aggregate gross proceeds raised and reimbursement of certain expenses and legal fees.

The Company received net proceeds of approximately $2.2 million after deducting the Placement Agent fees and other Offering expenses. The Company intends to use the net proceeds from the November 2022 Offering for working capital purposes.

October 2022 Public Offering

On October 11, 2022, the Company completed a public offering (the “October 2022 Offering”), priced at the market under Nasdaq rules, in which the Company issued an aggregate of (i)1,821 shares of common stock, par value $0.0001 per share (the “Common Stock”), of the Company, (ii) pre-funded warrants (the “October 2022 Pre-Funded Warrants”) to purchase up to an aggregate of 22,739 shares of Common Stock (the “October 2022 Pre-Funded Warrant Shares”) and (iii) common warrants (the “October 2022 Warrants”) to purchase up to an aggregate of 24,560 shares of Common Stock. The public offering price for each share of Common Stock and accompanying October 2022 Warrant to purchaseone share of Common Stock was $244.30, and the public offering price for each October 2022 Pre-Funded Warrant and accompanying October 2022 Warrant to purchaseone share of Common Stock was $244.286. The October 2022 Pre-Funded Warrants have an exercise price of $0.014 per share, are exercisable immediately and will expire when exercised in full. The October 2022 Warrants have an exercise price of $226.80 per share, are exercisable immediately and will expire five years from the initial exercise date.

As compensation to Wainwright, who was the exclusive placement agent in connection with the October 2022 Offering, the Company paid Wainwright a cash fee of 7% of the aggregate gross proceeds raised and reimbursement of certain expenses and legal fees.

The Company received net proceeds of approximately $5.2 million after deducting the Placement Agent fees and other Offering expenses. The Company intends to use the net proceeds from the Offering for working capital purposes.

July 2022 Private Placement

On July 15, 2022, the Company completed a private placement (the “July 2022 Offering”) in which the Company issued an aggregate of (i)150 shares of the Company’s Series D Preferred Stock, with a stated value $1,000 per share, convertible into an aggregate of 238 shares of the Common Stock, (ii)150 shares of the Company’s Series E Preferred Stock, with a stated value $1,000 per share, convertible into an aggregate of 238 shares of Common Stock, and (iii) Series D Warrants to purchase up to an aggregate of 476 shares of Common Stock (the “July 2022 Warrants”). The Series D Preferred Stock are convertible into an aggregate of 238 shares of Common Stock at a conversion price of $630.00 per share and the Series E Preferred Shares are convertible, following the August 26, 2022 reverse stock split, into an aggregate of 2381 shares of Common Stock at a conversion price of $630.00 per share. The July 2022 Warrants have an exercise price of $630.00 per share and will expire five years from the initial exercise date.

The Company received net proceeds of approximately $200,000 after deducting the offering expenses payable by the Company.

As compensation to Wainwright, who was the exclusive placement agent in connection with the July 2022 Offering, the Company paid Wainwright a cash fee of 7% of the aggregate gross proceeds raised and reimbursement of certain expenses and legal fees. The Company also issued to designees of Wainwright warrants (the “Placement Agent Warrants”) to purchase up to 28 shares of Common Stock. The Placement Agent Warrants were cancelled and terminated on October 5, 2022. None of the Placement Agent Warrants were exercised prior to cancellation and termination.

During the year ended December 31, 2022, all of the Series D Preferred Shares and the Series E Preferred Shares were converted into 476 shares of Common Stock.

March 2022 Registered Direct Offering

On March 2, 2022, the Company completed a registered direct offering (the “March 2022 Offering”) priced at the market under Nasdaq rules for an aggregate of 392 shares of Common Stock, pre-funded warrants exercisable for an aggregate of up to 1,154 shares of Common Stock (the “March 2022 Pre-Funded Warrants”), and Series C Warrants (the “March 2022 Warrants”) exercisable for an aggregate of up to 1,548 shares of Common Stock. The public offering price for each share of Common Stock and accompanying March 2022 Warrant to purchaseone share of Common Stock was $5,817.00, and the public offering price for each March 2022 Pre-Funded Warrant and accompanying March 2022 Warrant to purchaseone share of Common Stock was $5,775.00. The total net proceeds from the March 2022 Offering were approximately $8.0 million. The March 2022 Warrants have an exercise price of $5,292.00 per share and will be exercisable forfive years from the issuance date. The March 2022 Pre-Funded Warrants are exercisable forone share of Common Stock at an exercise price of $42.00 per share and will expire when exercised in full. Additionally, the Company issued warrants to the placement agent (the “March 2022 Placement Agent Warrants”) to purchase 92 shares of Common Stock equal to 6.0% of the aggregate number of shares of Common Stock and March 2022 Pre-Funded Warrants placed in the March 2022 Offering. The March 2022 Placement Agent Warrants have a term offive years from the date of the prospectus supplement relating to the March 2022 Offering and an exercise price of $7,266.00 per share.

The Company received net proceeds of approximately $8.0 million after deducting the Placement Agent fees and other Offering expenses. The Company intends to use the net proceeds from the Offering for working capital purposes.

Common Stock Issuances

2023 Issuances

During the year ended December 31, 2023, the Company issued 6,400 shares of Common Stock under the March 2023 Offering for which the Company received net proceeds of approximately $3.7 million.

During the year ended December 31, 2023, the Company issued 86,216 shares of Common Stock upon the exercise of an aggregate of 1,724,332 investor warrants for which the Company received net proceeds of approximately $2.2 million (See Note 10).

During the year ended December 31, 2023, the Company issued 30,500 shares of Common Stock under the July 2023 Offering for which the Company received net proceeds of approximately $1.8 million.

During the year ended December 31, 2023, the Company issued 294,101 shares of Common Stock upon the exercise of an aggregate of 294,101 investor warrants for which the Company received net proceeds of approximately $3.7 million (See Note 10).

During the year ended December 31, 2023, the Company issued 881,337 shares of Common Stock upon the exercise of an aggregate of 881,337 investor warrants for which the Company received net proceeds of approximately $4.5 million (See Note 10).

During the year ended December 31, 2023, the Company issued an aggregate of 199,974 shares of Common Stock upon the conversion of pre-funded warrants issued at a par value of $0.0001 (See Note 10).

During the year ended December 31, 2023, the Company issued an aggregate of 28 shares of Common Stock upon the exchange of an aggregate of 35.21 shares of Series B Preferred Stock with a stated value of approximately $271,000 plus accrued dividends of approximately $63,500.

During the year ended December 31, 2023, the Company issued an aggregate of 7,500 shares of its Common Stock to consultants with a grant date fair value of approximately $93,000 for investor relations services provided, which was recorded as stock-based compensation and included as part of general and administrative expense.

During the year ended December 31, 2023, the Company issued an aggregate of 5,673 shares of Common Stock upon the vesting of RSUs (See Note 11).

During the year ended December 31, 2023, the Company cancelled an aggregate of 481 shares of Common Stock in connection with the 1-for-20 reverse stock split on December 18, 2023 and the 1-for-7 reverse stock split on January 18, 2023.

2022 Issuances

During the year ended December 31, 2022, the Company issued 392 shares of Common Stock under the March 2022 Offering for which the Company received net proceeds of approximately $8.0 million.

During the year ended December 31, 2022, the Company issued 1,821 shares of Common Stock under the October 2022 Offering for which the Company received net proceeds of approximately $5.2 million.

During the year ended December 31, 2022, the Company issued and sold an aggregate of 10,851 shares of Common Stock under the ATM Agreement for which the Company received net proceeds of approximately $7.7 million.

During the year ended December 31, 2022, the Company issued an aggregate of 476 shares of Common Stock upon the conversion of Series E and Series D preferred stock.

During the year ended December 31, 2022, the Company issued an aggregate of 32,181 shares of Common Stock upon the conversion of pre-funded warrants issued at a par value of $0.0001 (See Note 10).

During the year ended December 31, 2022, the Company issued an aggregate of 111 shares of Common Stock and accompanying Exchange Warrants upon the exchange of an aggregate of 112.08 shares of Series B Preferred Stock with a stated value of approximately $863,000 plus accrued dividends of approximately $129,000.

During the year ended December 31, 2022, the Company issued an aggregate of 378 shares of its Common Stock to consultants with a grant date fair value of approximately $200,000 for investor relations services provided, which was recorded as stock-based compensation and included as part of general and administrative expense.

Note 10 – Warrants

Warrant activity for the years ending December 31, 2023 and 2022 were as follows:

The weighted average fair value of warrants granted during the years ended December 31, 2023 and 2022, was $22.78 and $4,090.40 per share, respectively. The grant date fair values were calculated using the Black-Scholes model with the following weighted average assumptions:

The outstanding warrants expire from 2024 through 2028.

During the year ended December 31, 2023, the Company issued warrants and pre - funded warrants to purchase 147,053 shares of the Company's Common Stock in connection with the March 2023 Offering, warrants to purchase 172,433 shares of the Company's Common Stock in connection with the June 2023 Inducement Offering, warrants and pre - funded warrants to purchase 462,250 shares of the Company's Common Stock in connection with the July 2023 Offering, warrants to purchase 588,204 shares of the Company's Common Stock in connection with the September 2023 Inducement Offering, and warrants to purchase 1,762,674 shares of the Company's Common Stock in connection with the December 2023 Inducement Offering (See Note 9).

During the year ended December 31, 2023, an investor exercised pre - funded warrants to purchase 199,974 shares of the Company's Common Stock in connection with previous offerings. During the year ended December 31, 2023, an investor exercised warrants to purchase 1,261,654 shares of the Company's Common Stock in connection with previous offerings as a result of the June 2023, September 2023, and December 2023 Inducement Offerings (see Note 9).

In connection with the November 2022 Offering, the Company entered into a warrant amendment agreement (the “Warrant Amendment Agreement”) to which the Company agreed to amend the investor’s existing warrants to purchase up to 26,692 shares of Common Stock at a weighted average exercise price of $3,455.80 per share (the “November Existing Warrants”), in consideration for the purchase of $2.5 million of securities in the November 2022 Offering (the “Purchase Commitment”), to (i) lower the exercise price of the November Existing Warrants to $107.59 per share and (ii) extend the termination date of the November Existing Warrants until the five and one-half year anniversary of the Stockholder Approval (the “Warrant Amendment”). The Warrant Amendment was effective upon the Stockholder Approval and the satisfaction of the other terms specified in the Warrant Amendment Agreement.

In connection with the March 2022 Offering, the Company entered into a warrant amendment agreement with an investor pursuant to which the Company agreed to amend the investor’s existing warrants to purchase up to 254 shares of Common Stock at an exercise price of $33,600.00 per share issued in January 2021 and warrants to purchase up to 93 shares of Common stock at an exercise price of $50,820.00 per share issued in March 2021 (the “March Existing Warrants”), in consideration for such investor’s purchase of $9.0 million of securities in the March 2022 Offering and payment of $118.02 per share for each share of common stock issuable upon exercise of the March Existing Warrants to (i) lower the exercise price of the March Existing Warrants to $5,292.00 per share and (ii) extend the termination date of the March Existing Warrants to March 2, 2027.

During the year ended December 31, 2022, the Company issued March 2022 Warrants, March 2022 Pre-Funded Warrants, and March 2022 Placement Agent Warrants to purchase 2,794 shares of Common Stock in connection with the March 2022 Offering, Exchange Warrants to purchase 45 shares of Common Stock in connection with a Series B Preferred Stock exchange, July 2022 Warrants to purchase 476 shares of Common Stock in connection with the July 2022 Offering, October 2022 Warrants and October 2022 Pre-Funded Warrants to purchase 47,299 shares of Common Stock in connection with the October 2022 Offering, and November 2022 Warrants and November 2022 Pre-Funded Warrants to purchase 89,285 shares of Common Stock in connection with the November 2022 Offering (See Note 9).

During the year ended December 31, 2022, an investor exercised pre-funded warrants to purchase 32,179 shares of the Company’s Common Stock in connection with previous offerings (see Note 9).

Note 11 – Equity Incentive Plan

The Company’s Board and stockholders adopted and approved the Amended and Restated 2014 Omnibus Equity Incentive Plan (the “2014 Plan”), which took effect on May 12, 2014. The Company’s Board and stockholders adopted and approved the 2020 Omnibus Equity Incentive Plan (the “2020 Plan”), which took effect on September 11, 2020. From the adoption and approval of the 2020 Plan, no new awards have been or will be made under the 2014 Plan.

The 2020 Plan allows for the issuance of securities, including stock options to employees, Board members and consultants. The initial number of shares of Common Stock available for issuance under the 2020 Plan was 238 shares, which will, on January 1 of each calendar year, unless the Board decides otherwise, automatically increase to equal ten percent (10%) of the total number of shares of Common Stock outstanding on December 31 of the immediately preceding calendar year, calculated on an As Converted Basis. As Converted Shares include all outstanding shares of Common Stock and all shares of Common Stock issuable upon the conversion of outstanding preferred stock, warrants and other convertible securities, but will not include any shares of Common Stock issuable upon the exercise of options and other convertible securities issued pursuant to either the 2014 Plan or the 2020 Plan. The number of shares permitted to be issued as “incentive stock options” (“ISOs”) is 357 under the 2020 Plan.

As of December 31, 2023, there were an aggregate of 73 total shares available (but un-issuable) under the 2014 Plan, of which 28 are issued and outstanding, and 9 shares are reserved subject to issuance of restricted stock and RSUs.

As of December 31, 2023,58,374 total shares were authorized under the 2020 Plan, of which 398 were issued and outstanding and 0 shares were available for potential issuances.

As of January 1, 2024, the number of shares of Common Stock available for issuance under the 2020 Plan automatically increased to 334,078 under the 2020 Plan’s evergreen provision.

The following table summarizes the Company’s stock option activity:

During the year ended December 31, 2022, stock options to purchase an aggregate of 3 and 26 shares of Common Stock under the 2014 Plan and 2020 Plan, respectively, were cancelled. During the year ended December 31, 2022, stock options to purchase an aggregate of 9 and 5 shares of Common Stock under the 2014 Plan and 2020 Plan, respectively, were forfeited.

The fair values were estimated on the grant dates using the Black-Scholes option-pricing model with the following weighted-average assumptions:

The expected term of the options is based on expected future employee exercise behavior. Volatility is based on the historical volatility of the Company’s Common Stock if available or of several public entities that are similar to the Company. The Company bases volatility this way because it may not have sufficient historical transactions in its own shares on which to solely base expected volatility. The risk-free interest rate is based on the U.S. Treasury rates at the date of grant with maturity dates approximately equal to the expected term at the grant date. The Company has not historically declared any dividends and does not expect to in the future.

The weighted average fair value of stock options granted during the years ended December 31, 2023 and 2022 was $61.00 and $4,473.60, respectively, per share.

The total fair value of the stock options vested, subject to service-based milestone vesting conditions, during the years ended December 31, 2023 and 2022 was approximately $112,000 and $769,000, respectively.

The total fair value of the stock options vested, subject to performance-based milestone vesting conditions, during each of the years ended December 31, 2023 and 2022 was $0.

Restricted Stock and Restricted Stock Units

Restricted stock refers to shares of Common Stock subject to vesting based on certain service, performance, and market conditions. Restricted stock unit awards (“RSUs”) refer to an award under the 2014 Plan, which constitutes a promise to grant shares of Common Stock at the end of a specified restriction period.

As of December 31, 2023 and December 31, 2022, the Company had an aggregate unrecognized restricted Common Stock expense of approximately $269,500 and $388,000, respectively, which will be recognized when vesting of certain milestones become probable.

During the year ended December 31, 2023, RSU activity under the 2020 Plan was as follows:

During the year ended December 31, 2023, the Board approved the grant of 58,460 RSUs. All grants of RSUs were pursuant to the 2020 Plan. Of the RSUs granted,50,455 vest upon a performance milestone and 8,005 vest quarterly over aone - year period and are issued in the following quarter. During the year ended December 31, 2023,5,673 RSUs vested.

Stock - based Compensation Expense

The total stock-based compensation expense for employees and non-employees is included in the accompanying condensed consolidated statements of operations and as follows:

As of December 31, 2023, the Company had unrecognized stock - based compensation expense of approximately $0.5 million. Approximately $0.1 million of this unrecognized expense will be recognized over the average remaining vesting term of the stock options of 1.05 years. Approximately $0.4 million of this unrecognized expense will vest upon achieving certain clinical and/or corporate milestones.

As of December 31, 2022, the Company had unrecognized stock-based compensation expense of approximately $0.8 million. Approximately $0.3 million of this unrecognized expense will be recognized over the average remaining vesting term of the stock options of 8.49 years. Approximately $0.5 million of this unrecognized expense will vest upon achieving certain clinical and/or corporate milestones.

Note 12 – Agreements

License Agreement with Sanofi

On September 13, 2023, the Company entered into a License Agreement with Sanofi, pursuant to which the Company received a license to obtain certain exclusive worldwide rights to develop and commercialize Capeserod, a selective 5-HT4 receptor partial agonist which the Company intends to repurpose and develop for gastrointestinal indications.

The Company paid Sanofi an upfront payment of $500,000 in October 2023 and Sanofi will be eligible to receive up to $46 million in potential development and regulatory milestone payments and up to $235 million in potential commercial milestone payments. Sanofi will also be eligible to receive mid-to-high single-digit royalties on net sales, as well as a percentage of sublicense and transfer revenues with respect to Capeserod. Sanofi will also have a right of first refusal with respect to Capeserod out-licensing transactions.

The upfront payment of $500,000 was recorded as research and development expense in the year ended December 31, 2023. Depending on the status of development at the time a contingent payment is recognized, the Company may determine that the payment should be expensed as research and development or be capitalized as an intangible asset. This determination will be based on the facts and circumstances that exist at the time a contingent payment is recognized.

The License Agreement shall expire on a country-by-country basis upon the later of: (i) the expiration of the last to expire valid claim of an applicable patent in such country covering such licensed product, (ii) the expiration of the regulatory exclusivity for such licensed product in the applicable country and (iii) the tenth anniversary of the date of first commercial sale of a licensed product in such country. Each party may terminate the License Agreement if the other party materially breaches its obligations under the License Agreement and fails to cure such material breach within 60 days from the date of such notice of breach, except in the case of payment breach, as to which the breaching party will have only aten-day cure period. Sanofi may terminate the License Agreement upon any bankruptcy proceedings by the Company. The Company may terminate the License Agreement by providing Sanofi with at least 60 days prior written notice; provided, however, that Sanofi shall be entitled to any and all payments due and owed to Sanofi prior to the effective date of termination.

Note 13 – Leases

The Company leases its office under an operating lease which is subject to various rent provisions and escalation clauses.

The Company is a party toone real property operating lease for the rental of office space. The Company has office space of 3,472 square feet in Boca Raton, Florida that is used for its corporate headquarters with a term through August 31, 2026. The Company previously had office space in Brooklyn, New York on a month-to-month basis, which was terminated in June 2023. The Company was also previously a party to office space in Hayward, California with a term through May 31, 2022, which was not renewed upon its expiration.

The Company’s lease expires in 2026. The escalation clause is indeterminable and considered not material and has been excluded from minimum future annual rental payments.

Lease expense amounted to approximately $154,000 and $157,000 for the years ended December 31, 2023 and 2022, respectively.

The weighted-average remaining lease term and weighted-average discount rate under operating leases at December 31, 2023 were:

Maturities of operating lease liabilities at December 31, 2023 were as follows:

Note 14 - Income Taxes

The Company is subject to taxation at the federal and state levels in the United States. At December 31, 2023 and 2022, the Company hadno tax provision.

At December 31, 2023 and 2022, the Company had gross deferred tax assets of approximately$33.5 million and$29.5 million, respectively. As the Company cannot determine that it is more likely than not that the Company will realize the benefit of the deferred tax asset, a valuation allowance of approximately$33.4 million and$29.5 million has been established at December 31, 2023 and 2022, respectively. The change in the valuation allowance was approximately$4.0 million and$2.1 million in 2023 and 2022, respectively.

The significant components of the Company’s net deferred tax assets and liabilities consisted of:

Income taxes computed using the federal statutory income tax rate differs from the Company’s effective tax rate primarily due to the following:

As of December 31, 2023, the Company has federal and state net operating loss carryforwards of approximately $93.5 million and $72.3 million, respectively, to offset future federal and state taxable income. Of the approximately $93.5 million of federal net operating loss carryforwards, approximately $14.8 million will begin to expire starting in 2034. The remaining federal net operating loss carryforwards do not expire, but their utilization is limited to 80% of taxable income. The state net operating loss carryforwards of approximately $72.3 million will begin to expire in 2035. As of December 31, 2023, the Company also has federal research and development tax credit carryforwards of approximately $2.1 million to offset future income taxes, which expire beginning in 2040.

The Company’s ability to use its NOL carryforwards may be limited if it experiences an “ownership change” as defined in Section 382 of the Internal Revenue Code of 1986, as amended. An ownership change generally occurs if certain stockholders increase their aggregate percentage ownership of a corporation’s stock by more than 50 percentage points over their lowest percentage ownership at any time during the testing period, which is generally the three-year period preceding any potential ownership change. The Company has not completed a study to determine whether transactions that have occurred over the past three years may have triggered an ownership change limitation.

The Company had takenno uncertain tax positions that would require disclosure under ASC 740, Accounting for Income Taxes, at December 31, 2023 and 2022, respectively.

Note 15 - Net Loss per Common Share

Basic net loss per share is computed by dividing net loss available to Common Stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share reflect, in periods in which they have a dilutive effect, the impact of common shares issuable upon exercise of stock options and warrants and conversion of convertible debt that are not deemed to be anti-dilutive. The dilutive effect of the outstanding stock options and warrants is computed using the treasury stock method.

All shares of Common Stock that may potentially be issued in the future are as follows:

(1)Convertible preferred stock is assumed to be converted at the rate of $32,340 per common share, which is the conversion price as of December 31, 2023.

Note 16 - Employee Benefit Plans

401(k) Plan

Since 2015, the Company has sponsored a multiple employer defined contribution benefit plan, which complies with Section 401(k) of the Internal Revenue Code covering substantially all employees of the Company.

All employees are eligible to participate in the plan. Employees may contribute from 1% to 100% of their compensation and the Company matches an amount equal to 100% on the first 6% of the employee contribution and may also make discretionary profit-sharing contributions.

Employer contributions under this 401(k) plan amounted to approximately $87,000 and $112,000 for the years ended December 31, 2023 and 2022, respectively.

Note 17 - Subsequent Events

Merger with ImmunogenX

On March 13, 2024, the Company acquired ImmunogenX, Inc.(the “Merger”), a Delaware corporation, in accordance with the terms of an Agreement and Plan of Merger, dated March 13, 2024 (the “Merger Agreement”), by and among the Company, IMMUNO Merger Sub I, Inc., a Delaware corporation (“First Merger Sub”), IMMUNO Merger Sub II, LLC, a Delaware limited liability company (“Second Merger Sub”), and IMGX. Pursuant to the Merger Agreement, First Merger Sub merged with and into IMGX, pursuant to which IMGX was the surviving corporation (the “First Merger”). Immediately following the First Merger, IMGX merged with and into Second Merger Sub, pursuant to which Second Merger Sub was the surviving entity and a wholly owned subsidiary of the Company (the “Second Merger” and, together with the First Merger, the “IMGX Merger”). The Merger is intended to qualify as a tax-free reorganization for U.S. federal income tax purposes.

Under the terms of the Merger Agreement, following the consummation of the Merger (the “Closing”), in exchange for the outstanding shares of capital stock of IMGX immediately prior to the effective time of the First Merger, the Company issued to the stockholders of IMGX an aggregate of(A)36,830 shares of Common Stock, and (B)11,777.418 shares of Series G Preferred Stock, each share of which is convertible into 1,000 shares of Common Stock, subject to certain conditions described below. In addition, the Company assumed (i) all IMGX stock options immediately outstanding prior to the First Merger, each becoming an option to purchase Common Stock subject to adjustment pursuant to the terms of the Merger Agreement (the “Assumed Options”) and (ii) all IMGX warrants immediately outstanding prior to the First Merger, each becoming a warrant to purchase Common Stock subject to adjustment pursuant to the terms of the Merger Agreement (the “Assumed Warrants”). The Assumed Options are exercisable for an aggregate of 200,652 shares of Common Stock, have an exercise price of $0.81 and expire between February 1, 2031 and June 6, 2033. The Assumed Warrants are exercisable for an aggregate of 127,682 shares of Common Stock, have exercise prices ranging from $3.02 to $3.92 and expire between September 30, 2032 and September 6, 2033.

The foregoing description of the Assumed Warrants does not purport to be complete and is qualified in its entirety by reference to the form of Assumed Warrant.

Tungsten Partners LLC (“Tungsten”) acted as financial advisor to the Company in connection with the Merger. As partial compensation for services rendered by Tungsten, the Company issued to Tungsten or its affiliates or designees an aggregate of 18,475 shares of Common Stock and 595.808 shares of Series G Preferred Stock.

Pursuant to the Merger Agreement, the Company has agreed to hold a stockholders’ meeting to submit the following matters to its stockholders for their consideration: (i) the approval of the conversion of shares of Series G Preferred Stock into shares of Common Stock in accordance with the rules of the Nasdaq Stock Market LLC (the “Conversion Proposal”) and (ii) if deemed necessary or appropriate by the Company or as otherwise required by applicable law or contract, the approval of an amendment to the Company’s certificate of incorporation, as amended (the “Charter”), to authorize sufficient shares of Common Stock for the conversion of Series G Preferred Stock issued pursuant to the Merger Agreement (the “Share Increase Proposal” and together with the Conversion Proposal, the “Meeting Proposals”). In connection with these matters, the Company has agreed to file a proxy statement with the Securities and Exchange Commission (the “SEC”).

The Board of Directors of Company (the “Board”) and the holders of a majority of the Company's Series B Convertible Preferred Stock approved the Merger Agreement and the related transactions and the consummation of the Merger was not subject to approval of Company stockholders.

The foregoing description of the Merger and the Merger Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Merger Agreement.

The Merger Agreement contains representations, warranties and covenants that the Company and IMGX made to each other as of specific dates. The assertions embodied in those representations, warranties and covenants were made solely for purposes of the Merger Agreement between the Company and IMGX and may be subject to important qualifications and limitations agreed to by the Company and IMGX in connection with negotiating its terms, including being qualified by confidential disclosures exchanged between the parties in connection with the execution of the Merger Agreement. Moreover, the representations and warranties may be subject to a contractual standard of materiality that may be different from what may be viewed as material to investors or securityholders, or may have been used for the purpose of allocating risk between the Company and IMGX rather than establishing matters as facts. Moreover, information concerning the subject matter of the representations and warranties may change after the date of the Merger Agreement, which subsequent information may or may not be fully reflected in the Company’s public disclosures. For the foregoing reasons, no person should rely on the representations and warranties as statements of factual information at the time they were made or otherwise.

The transaction is expected to be accounted for under the acquisition method of accounting with First Wave as the acquirer under the guidance of ASC 810-10, "Consolidation". Under the acquisition method, the total purchase price of the Merger is allocated to the net identifiable tangible and intangible assets acquired and liabilities assumed based on the fair values as of the date of such acquisition. Due to the timing of the closing of this merger, certain disclosures, including the allocation of the purchase price, have been omitted because the initial accounting for the business combination was incomplete as of the filing date.

Registered Direct Offering

On March 6, 2024, the Company closed on a Registered Direct Offering with an institutional investor for the purchase and sale of 525,625 shares of the Company’s Common Stock (or Common Stock equivalents) at a price of $7.61 per share. In addition, the Company issued to the investor warrants to purchase up to 525,625 shares of Common Stock. The warrants have an exercise price of $7.48 per share, are exercisable immediately following the date of issuance, and have a term offive years following the date of issuance. Roth Capital Partners acted as the exclusive placement agent for the offering. The gross proceeds to the Company from this offering were approximately $4.0 million, before deducting the placement agent's fees and other offering expenses payable by the Company.

Issuance of Restricted Stock Units

On January 2, 2024, the Company issued to employeesten-year restricted stock units of 40,000 shares of Common Stock, subject to service-based milestones vesting quarterly overone year under the 2020 Plan as payment for services rendered. Such issuance was exempt from registration under 4(a)(2) of the Securities Act.

On January 2, 2024, the Company issued to consultantsten-year restricted stock units of 2,000 shares of Common Stock, subject to service-based milestones vesting quarterly overone year under the 2020 Plan as payment for services rendered. Such issuance was exempt from registration under 4(a)(2) of the Securities Act.

On January 2, 2024, the Company issued to the Board of Directorsten-year restricted stock units of 78,532 shares of Common Stock, subject to service-based milestones vesting quarterly overone year under the 2020 Plan as payment for services rendered. Such issuance was exempt from registration under 4(a)(2) of the Securities Act.